China Evergrande Group’s (恆大集團) electric vehicle (EV) unit jumped in Hong Kong trading after the chairman of the indebted property giant said that making such vehicles would become its main business within a decade.
Shares of China Evergrande New Energy Vehicle Group Ltd (Evergrande NEV, 恆大新能源汽車) yesterday climbed as much as 17 percent, the most in three weeks.
Evergrande rose 6 percent before paring the gain to 0.7 percent at 3:01pm.
The Securities Times on Friday reported that Evergrande chairman Xu Jiayin (許家印), or Hui Ka Yan in Cantonese, said he plans to scale down real-estate operations to focus on new energy vehicles.
CHALLENGES
The reported shift to the EV business would be a challenge, given that the firm has yet to deliver a single vehicle, despite Hui’s ambitions to take on Tesla Inc.
The world’s most indebted developer is struggling with a cash crisis that has led it to consider selling stakes in units, including Evergrande NEV.
Evergrande NEV was up 11 percent in afternoon trading, but remained about 94 percent off its peak in February.
The company last month warned of a “serious shortage of funds” and said there was no guarantee it could meet financial obligations.
The liquidity shortage meant that it stopped paying some operating expenses and some of its suppliers turned away.
The company’s first electric vehicle — “Hengchi” — is to be delivered from its Tianjin factory at the start of next year, according to an Oct. 11 statement on Evergrande’s Web site, which also referred to a “three-month war” to tackle the main challenges in EVs.
In August, the company said that it might need to delay mass production of vehicles unless it could secure more capital in the short term.
Evergrande, which also has operations ranging from a soccer club to mineral water, has been criticized by the Chinese central bank for “failing to manage its business well.”
CRITICISM
In a usually harsh comment, People’s Bank of China financial markets department deputy head Zou Lan (鄒瀾) earlier this month said the developer “blindly expanded and diversified” over the past few years, instead of operating prudently amid changing market conditions.
Evergrande spent more than US$3.7 billion on an array of EV-related companies after announcing in 2019 that it wanted to be the world’s premier manufacturer of green vehicles.
NO CASH
That has yet to pay off, with Evergrande NEV reporting a 4.8 billion yuan (US$752.23 million) loss in the first half of this year.
Last month, the unit scrapped a proposed listing on Shanghai’s Star board.
In principle, Evergrande is not to buy land over the next 10 years, Hui told an internal meeting, according to the Securities Times report.
Annual sales of real estate would drop to about 200 billion yuan in 10 years from 700 billion yuan last year, he was quoted as saying.
Evergrande declined to comment, but has said that construction at more than 40 projects in Guangdong Province in China is proceeding smoothly and that the homes are to be delivered to purchasers.
The developer owes more than US$300 billion to banks, bondholders, suppliers and investors.
Last week, the company pulled back from the brink of default when it paid an US$83.5 million bond coupon just before the deadline.
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